HOUSTON, March 18 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (BULLETIN BOARD: GNRG) today announced full year 2007 financial results. For the year, the company posted income from continuing operations of $2.4 million, or $0.13 per diluted share, compared to $399,000, or $0.02 per diluted share, posted at year end 2006. Net income increased to $3.6 million, or $0.20 per diluted share for 2007, compared to $305,000, or $0.02 per diluted share, for 2006. Net income was favorably impacted by a $1.2 million one-time after tax gain on the sale of Fort Cobb Fuel Authority and a $1.7 million reversal of the allowance for deferred tax assets resulting in an income tax benefit.
Additionally, during 2007 Gateway had the following results: -- Total revenue of $11.5 million, an increase of 40% over 2006. -- Increased shareholder equity 82% to $11,124,000. -- Operating income increased to $424,000 from $415,000.
Revenue from onshore operations increased 37% from $6.8 million in 2006 to $9.4 million in 2007, due primarily to increased sales volumes on Gateway's Waxahachie distribution system. Operating margins increased 9% from $1.12 million in 2006 to $1.22 million in 2007.
Revenue from the offshore operations increased 60% to $2.1 million for 2007 as compared to $1.3 million for 2006. Operating margins for offshore operations for the year ended December 31, 2007 increased $545,000 compared to 2006 due primarily to the acquisition of Gulfshore Midstream's offshore pipeline assets in August, 2007 as well as increased throughput volumes on Gateway's Bolivar pipeline system. This was offset by a slight decline in throughput volumes on the Pirates Beach pipeline system.
The outlook for 2008 is favorable. Gateway connected one new well to its offshore Bolivar pipeline system and added additional throughput volumes from several well recompletions in the first two months of 2008 and expects the pace of offshore drilling activity to remain strong in 2008 due to high commodity prices.
Gateway also expects additional revenue growth from the onshore assets in 2008 when the Madisonville gas treatment plant expansion is completed. The operator of the plant is currently validating a proposed system modification to address the removal of diamondoids. A diamondoid is a rare, naturally occurring compound that can separate out of the gas stream upon a decrease in temperature and pressure and as such, could cause operational problems for the nitrogen rejection portion of the new plant.
Gateway understands that the modifications should be completed within 60 to 90 days after the validation is completed. Based upon this information, Gateway believes that the modifications will most likely be completed before the end of the second quarter of 2008. While this is later than we had anticipated, Gateway remains optimistic that the Madisonville gas treatment plant expansion will significantly contribute to its onshore growth in 2008. In the meantime, the existing, older portion of the plant continues to treat approximately 15,000 Mcf per day of inlet gas.
Management Comments
Mr. Robert Panico, President and Chief Executive Officer of Gateway said, "I am very pleased with the results we were able to deliver for our shareholders in 2007. This strong showing validates our decision to divest underperforming assets and focus our efforts on what we do best, which is operating a profitable midstream company." Mr. Panico went on to say, "I am equally excited about the prospects for additional growth in 2008. The long awaited expansion of the Madisonville treatment plant should have a significant impact on revenues once it is fully operational, with no incremental capital expenditures. We are also aggressively seeking acquisition opportunities in the midstream sector."
Use of Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-generally accepted accounting principles, or non-GAAP, financial measures of segment operating margin. The accompanying schedule provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, cash flows from operating activities or any other GAAP measure of liquidity or financial performance. Gateway uses non-GAAP financial measures as measures of its core profitability or to assess the financial performance of its assets. Gateway believes that investors benefit from having access to the same financial measures that its management uses in evaluating performance.
With respect to a Gateway operating segment, segment operating margin is defined as segment revenue less cost of purchased gas and operating and maintenance expenses. Such amounts are before general and administrative expense, depreciation and amortization expense, interest income or expense or income taxes. The Company views total segment operating margin as an important performance measure of the core profitability of its operations. This measure is a key component of internal financial reporting and is used by senior management in deciding how to allocate capital resources among operating segments. The GAAP measure most directly comparable to total segment gross margin is operating income.
About Gateway Energy
Gateway Energy Corporation is a growth-oriented midstream energy company providing natural gas gathering, transmission, processing and oil handling and storage services in Texas, Galveston Bay and the Gulf of Mexico.
Safe Harbor Statement
Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect," "plan," "believe," "may," "anticipate," "project," "estimate," "outlook" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED December 31, 2007 2006 ASSETS Current Assets Cash and cash equivalents $1,807,224 $992,821 Restricted cash - 43,145 Trade accounts receivable 1,852,849 589,087 Prepaid expenses and other assets 41,812 101,927 Current assets of discontinued operations - 1,171,301 Total current assets 3,701,885 2,898,281 Property and Equipment, at cost Gas gathering, processing and transportation 11,120,558 7,591,662 Office furniture and other equipment 229,298 206,991 11,349,856 7,798,653 Less accumulated depreciation and amortization (3,390,634) (3,303,485) 7,959,222 4,495,168 Other Assets Deferred tax assets, net 1,668,743 - Intangible assets, net of accumulated amortization of $65,278 in 2007 922,142 - Other 269,601 115,736 Non-current assets of discontinued operations - 1,466,833 2,860,486 1,582,569 Total assets $14,521,593 $8,976,018 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,138,653 $415,088 Accrued expenses and other liabilities 251,368 65,402 Current maturities of long-term debt - 79,146 Current maturities of capital lease 17,371 14,912 Current liabilities of discontinued operations - 950,850 Total current liabilities 1,407,392 1,525,398 Future asset retirement obligations 394,640 368,255 Long-term debt, less current maturities 750,000 - Long-term capital lease, less current maturities 29,422 47,102 Minority interest 816,222 838,363 Non-current liabilities of discontinued operations - 92,483 Commitments and contingencies - - Stockholders' Equity Preferred stock - $1.00 par value; 10,000 shares authorized; no shares issued and outstanding - - Common stock - $0.25 par value; 35,000,000 shares authorized; 19,026,665 and 17,140,937 issued and outstanding in 2007 and 2006, respectively 4,756,665 4,285,232 Additional paid-in capital 17,089,744 16,158,552 Accumulated deficit (10,722,492)(14,339,367) Total stockholders' equity 11,123,917 6,104,417 Total liabilities and stockholders' equity $14,521,593 $8,976,018 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED Year Ended December 31, 2007 2006 Operating revenues Sales of natural gas $8,732,108 $6,288,869 Transportation of natural gas and liquids 2,280,882 1,697,789 Treating and other 441,521 174,913 11,454,511 8,161,571 Operating costs and expenses Cost of natural gas purchased 7,914,502 5,495,770 Operation and maintenance 754,633 526,370 General and administrative 1,811,379 1,290,205 Depreciation and amortization 523,586 409,384 Accretion and changes in estimates 26,385 24,623 11,030,485 7,746,352 Operating income 424,026 415,219 Other income (expense) Interest income 114,265 31,333 Interest expense (95,599) (10,609) Gain on sale of intangible assets 286,579 - Other income, net 55,119 51,837 Minority interest (94,060) (88,951) 266,304 (16,390) Income from continuing operations before income taxes and discontinued operations 690,330 398,829 Provision for income tax benefit 1,668,743 - Income from continuing operations 2,359,073 398,829 Discontinued operations, net of taxes Income from discontinued operations, net of taxes 16,080 (93,638) Gain on disposal of discontinued operations, net of taxes 1,241,722 - Net income $3,616,875 $305,191 Basic and diluted income per share: Continuing operations $0.13 $0.02 Discontinued operations 0.07 - Net income $0.20 $0.02 Weighted average number of common shares outstanding: Basic 17,781,059 17,131,485 Diluted 17,956,541 17,170,343 Non-GAAP Financial Measures
The following table presents a reconciliation of the non-GAAP financial measures of total segment operating margin (which consists of the sum of individual segment operating margins and corporate) to the nearest comparable GAAP financial measure of operating income.
Year Ended December 31, 2007 2006 Onshore Operations Revenues $9,352,113 $6,844,264 Cost of natural gas purchased 7,914,502 5,495,770 Operation and maintenance expense 215,740 227,616 Operating margin 1,221,871 1,120,878 General and administrative expense 973,544 604,075 Depreciation and amortization expense 207,966 249,821 Operating income 40,361 266,982 Offshore Operations Revenues 2,102,398 1,317,307 Operation and maintenance expense 538,893 298,754 Operating margin 1,563,505 1,018,553 General and administrative expense 831,459 457,628 Depreciation and amortization expense 311,168 151,713 Accretion expense 26,385 24,623 Operating income 394,493 384,589
